New Silk Road Summit: Toward a Symbiotic "Bretton Woods"?

May 08 , 2017

“Right, as the world goes, is only in question between equals in power, while the strong do what they can and the weak suffer what they must”. This categorical quotation was used two millennia ago by the Athenians to impose their imperium over the small island of Melos. It might also have been quoted by Harry Dexter White in the 1944 Bretton Woods Summit. When John Maynard Keynes, the impeccable representative of the faltering British Empire, cited highly sophisticated economics, White, his American counterpart, spoke the formidable language of Realpolitik. Armed with a potent industrial economy and the world's sole nuclear arsenal, the American negotiator ultimately carried the day.

Since then the world has been inarguably shaped by American economic and political imperatives. In retrospect, the then seemingly potent power of revolutionary communism – arousing fear for almost four decades – had only been an aberrational distraction to the unyielding rise of the Pax Americana. Today however, a new contender has risen. China has returned from its self-proclaimed century of humiliation and seems to be both willing and able to reshape a system born in her absence. A wide array of voices in the Chinese Communist Party including influential strategists like Yan Xuetong have now called for the abandonment of Deng Xiaoping's “keeping a low profile” dogma (also known as hide one's might and build one's strength - taoguang yanghui 韜光養晦) and have argued for a more proactive China both in its economic and, in a sharp departure from recent precedent, also in its strategic and political outreach.

These new calls for a China “striving for achievement” reflect the widespread belief among Chinese elites that the power gap with the United States has narrowed and since the 2008 Wall Street meltdown the legitimacy of U.S. global rule has been enervated. In core indicators of power and influence the Middle Kingdom already equals and often surpasses the United States: China has, as of 2017, a larger GDP (PPP); it has become the world's largest industrial exporter; it has reached parity in the disruptive techs of the 21st century (mainly Artificial Intelligence and Quantum Communications); and in the age of globalization, the Middle Kingdom has become the most important bilateral trade partner of 124 countries, significantly outperforming the U.S., which can count only 74.

Amidst commercial turbulence and the U.S.'s neo-isolationist drive, China has cultivated its image as a mighty force for globalization with President Xi Jinping's presenting eulogy at Davos. Even before Xi's Davos speech however, China has been carefully planning its own institutional structures along the lines of global capitalism. Gradually but with decisive strikes, Beijing has established its own rating agency (Universal Credit Rating Group), upgraded the international role of its currency (set up offshore renminbi centers and successfully won the RMB's inclusion in IMF's special drawing rights), contributed most to UN peacekeeping by a large margin, and set up its own version of the World Bank with the Asian Infrastructure and Investment Bank (AIIB). As Zhang Jun, the director general of the department of international economic affairs of the ministry of foreign affairs has put it, China has gently yet unswervingly upgraded its normative power in global governance. China, Zhang declared, “is marching toward a new era where its economic diplomacy can make remarkable achievements,” and has already sponsored daring declarations like the G20 Action Plan on the 2030 Agenda for Sustainable Development.

Along with these already impressive institutional innovations, China has for the past five years put forward what appears to be the most ambitious economic integration project in modern history outmatching the financial instruments of the Marshal Plan by many orders of magnitude: The New Silk Road or as it has been officially framed: the 'Belt and Road' Initiative. According to recent statements from senior Chinese officials, this initiative is already offering “early harvests” through international cooperation and has propelled China to the forefront of the global stage. Now the uncertain international environment and the unpopularity of Trump in Europe makes the Chinese willing to grab the momentum and take the BRI to a new level.

The Silk road summit in Beijing

The Silk Road Summit, officially called the 'Belt and Road' Forum for International Cooperation took place on May 14-15 in Beijing. Officially announced at Davos by Xi Jinping, Chinese government bodies and state media have since then carefully let out information surrounding the summit. Two dozen world leaders attended the summit, coming from Asia, Europe, Africa and Latin America. Along with them, ministerial delegations, representatives from international organizations, former dignitaries, well-known industry figures, and influential experts were also present. Echoing in opposite the recent declarations of the Trump administration, the theme of the summit revolved around a core tenet of globalization: trade connectivity.

The summit has been officially described as “the most important Chinese diplomatic event of 2017,” “a strategic move to invigorate world economy,” “a major platform to deepen international cooperation,” and an occasion to “draw out the blueprint for the 'Belt and Road,'” all this as China is gradually upgrading its responsible leadership role internationally. The summit also provided China an opportunity to clarify its 'Belt and Road' initiative, known for its grand but vague ambition. Ultimately, it is in line with China's loud condemnation of protectionism, and continued championing of globalization.

A game changer?

Faced with the grandeur of the 'Belt and Road' project and the spectacular investment numbers touted by the press, commentators have not hesitated to declare this still thinly described initiative “a global game-changer” and to suggest similarity with the sharp rise of the United States after WWII.

Nonetheless, obvious historical differences separate the world that the U.S. faced back then from the world that China faces today. WWII had annihilated Europe and Asia, allowing the U.S. to stand supreme and unchallenged in a major power asymmetry with the rest of the world. The Bretton Woods was, quintessentially, a U.S. unipolar moment and it was U.S. unmatched military and industrial mass that ultimately determined the global trade norms. China today, though on the rise, cannot outmatch the concerted forces of serious competitors in its periphery let alone project global military power. Increasingly, however, Beijing has found itself capable of projecting commercial, technological, and to a certain extent institutional power abroad. This new might is at the core of the Belt and Road Initiative, and may justify a parallel with historical events that have shaped global dynamics since 1944.

Very much like the Bretton Woods conference, the initial impulse of the 'Belt and Road' and its summit stems from an eagerness to address the economic woes of our age and challenges to globalization. In 1944 there was a collective consensus that the catastrophic mid-war period stemmed from the denial of the U.S. to provide public goods while it had already surpassed Great Britain as the leading industrial economy — a case well understood by Charles Kindleberger, the intellectual architect of the Marshal plan.

Today, the Belt and Road's larger effect is to solidify a greater world community around a dominant core, China, and a wider periphery, Eurasia. It is the latter that has the potential to bring about new relations of power within the world economy. This is not to say we are seeing the birth of a new global system per se, but rather a shift in the current one—a shift of its center of gravity from the Atlantic Ocean to Eurasia. Henry Kissinger has captured this in his latest book “World Order”, declaring that Eurasian economic integration turns the U.S. into a peripheral geopolitical island. Though the general rules of the game remain valid, some big players lose their advantage and others rise to the occasion, while the disruption allows many more to enter the game. In the same way, post-Bretton Woods England lost its primacy while Germany, a renewed European Community, Japan and many parts of Asia rose simultaneously.

Therefore, despite obvious differences between the Bretton Woods power dynamics and today's uncertain present, there remains a major similarity: the naissance of both an abstract community and an institutional structure capable of upholding a global political-economic system — previously guaranteed by the United States and today placed slowly under the guardianship of the Middle Kingdom. In fact, this renewed system's major institutions and policies have already been decided. From the AIIB which is seen by the United States at least as a competitor to the World Bank, to the countless bilateral and multilateral agreements that have tied the economic fate of countries around the globe to China, a great part of Eurasia is now infused by the structures and stories needed to create a new Sino-centric status quo. In a multipolar world, the formation of global governance architecture is not episodic, but an ongoing systematic process, and Beijing's BRI summit was not designed to plot for a compelling Chinese victory, but instead orchestrate China's return as a vigorous global power.

From the international community to a Sino-centric community of fate?

The basic structure of the BRI is that of a substantial liquidity provision by the Chinese, encouraging a greater interdependence and connectivity of Eurasian economies. This summit strived to give the 'BRI' global recognition based on a “community of fate” (mingyun gongtongti), mirror image of the still largely Western “international community” that solidifies the openness of world economy and free trade.

The Bretton Woods system, beyond the institutions and practices it put in place, stands for the global economic status quo, the economic mega-deal of an international community, which both made and were made by these institutions and practices. Our contention is that such a catalyst's role might be shared by the Silk Road Summit. It took two years to prepare the discussions the delegates were to have in Bretton Woods in July 1944. With its own plethora of negotiations, the 'BRI' vision of the Chinese has been in the making since official speeches announcing its launch in 2013. Like the talks held at Bretton Woods, the Silk Road Summit could be understood as the formal crystallization of a process that precedes and exceeds it, a process it is meant to embody.

The success of the Silk Road Summit however will not be judged by the ambitious catchphrases that surround it but by the commitments that China and the participating countries will undertake in issues of global governance. China has the opportunity to set the bar high from global warming and inequality to reciprocal free trade and global development, and to prove that “with great power comes great responsibility.”

Sino-U.S. fiduciary institutional symbiosis

While in 1944 Harry Dexter White could simply veto the demands of the British, today Washington will have to engage with China on a much less assured footing. Boycotting Beijing's initiatives, wishfully thinking that China lacks the capacity for institutional entrepreneurship, would be a self-inflicted wound.

The renowned British historian and diplomat, E. H. Carr, authoritatively attested that the core pursuit of the study of international relations is, "to establish methods of peaceful change.” The BRI with its developmental agenda and grand vision for an integrated and economically flourishing Eurasia offers an attractive roadmap for the United States and China to work together. Instead of institutional contention the two nations in the spirit of amity must look for an institutional symbiosis that could serve the highest ideas of both. Neither nation is unassailable from bilateral conflict.